An accounting information system (AIS) is a system of collection, storage and processing of financial and accounting data that is used

by decision makers. An accounting information system is generally a computer-based method for tracking accounting activity in conjunction with information technology resources. The resulting statistical reports can be used internally by management or externally by other interested parties including investors, creditors and tax authorities. The actual physical devices and systems that allows the AIS to operate and perform its functions 1. Internal controls and security measures: what is implemented to safeguard the data 2. Model Base Management

A big advantage of computer-based accounting information systems is that they automate and streamline reporting.[1] Reporting is major tool for organizations to accurately see summarized, timely information used for decision-making and financial reporting. The accounting information system pulls data from the centralized database, processes and transforms it and ultimately generates a summary of that data as information that can now be easily consumed and analyzed by business analysts, managers or other decision makers. These systems must ensure that the reports are timely so that decision-makers are not acting on old, irrelevant information and, rather, able to act quickly and effectively based on report results. Consolidation is one of the hallmarks of reporting as people do not have to look through an enormous number of transactions. For instance, at the end of the month, a financial accountant consolidates all the paid vouchers by running a report on the system. The systems application layer provides a report with the total amount paid to its vendors for that particular month. With large corporations that generate large volumes of transactional data, running reports with even an AIS can take days or even weeks. After the wave of corporate scandals from large companies such as Tyco

International, Enron and WorldCom, major emphasis was put on enforcing public

companies to implement strong internal controls into their transaction-based systems. This was made into law with the passage of the Sarbanes Oxley Act of 2002 which stipulated that companies must generate an internal control report stating who is responsible for an organizations internal control structure and outlines the overall effectiveness of these controls.[2] Since most of these scandals were rooted in the companies' accounting practices, much of the emphasis of Sarbanes Oxley was put on computer-based accounting information systems. Today, AIS vendors tout their governance, risk management, and compliance features to ensure business processes are robust and protected and the organization's assets (including data) are secured.

The Accounting department at the Wisconsin School of Business prepares students both to perform expertly in a role without which no business could function and to spearhead ground-breaking research. We offer three degrees: a BBA-which is ranked among the nations top 20 by U.S. News & World Report, a MAcc, and a Ph.D. MAcc students have two options: the five-year program, which integrates the masters curriculum with the undergraduate or the two-year graduate program, which is appropriate for students with little or no accounting background. Accounting department faculty fields of expertise include corporate governance, earnings management, equity valuation, health care accounting, health care financial management, internal controls and audit quality, international financial reporting standards, managerial accounting, Sarbanes-Oxley, securities regulation, strategic cost management, and taxes and federal tax policy. The Arthur Andersen Center for Financial Reporting and Control and the Robert Beyer Center for Managerial Accounting and Control are the research and outreach centers that call the accounting department home.

Investopedia explains 'Accounting Information System - AIS' An accounting information systems that combines traditional accounting practices such as the Generally Accepted Accounting Principles (GAAP) with modern information technology resources. Six elements compose the typical accounting information system:

People - the system users. Procedure and Instructions - methods for retrieving and processing data. Data - information pertinent to the organization's business practices. Software - computer programs used to process data. Information Technology Infrastructure - hardware used to operate the system. Internal Controls - security measures to protect sensitive data.

How to effectively implement AIS[edit source | editbeta] As stated above,accounting information systems are composed of six main components:.[3] When an AIS is initially implemented or converted from an existing system, organizations sometimes make the mistake of not considering each of these six components and treating them equally in the implementation process. This results in a system being "built 3 times" rather than once because the initial system is not designed to meet the needs of the organization, the organization then tries to get the system to work, and ultimately, the organization begins again, following the appropriate process. Following a proven process that works, as follows, results in optimal deployment time, the least amount of frustration, and overall success. Most organizations, even larger ones, hire outside consultants, either from the software publisher or consultants who understand the organization and who work to help the organization select and implement the ideal configuration, taking all components into consideration. Certified Public Accountants (CPAs) with careers dedicated to information systems work with

small and large companies to implement accounting information systems that follow a proven process. Many of these CPAs also hold a certificate that is awarded by the American Institute of CPAsthe Certified Information Technology Professional (CITP). CITPs often serve as co-project managers with an organization's project manager representing the information technology department. In smaller organizations, a coproject manager may be an outsourced information technology specialist who manages the implementation of the information technology infrastructure.[4] The steps necessary to implement a successful accounting information system are as follows: Detailed Requirements Analysis where all individuals involved in the system are interviewed. The current system is thoroughly understood, including problems, and complete documentation of the current systemtransactions, reports, and questions that need to be answered are gathered. What the users need that is not in the current system is outlined and documented. Users include everyone, from top management to data entry. The requirements analysis not only provides the developer with the specific needs, it also helps users accept the change. Users who have the opportunity to ask questions and provide input are much more confident and receptive of the change, than those who sit back and don't express their concerns. Systems Design (synthesis) The analysis is thoroughly reviewed and a new system is created. The system that surrounds the system is often the most important. What data needs to go into the system and how is this going to be handled? What information needs to come out of the system, and how is it going to be formatted? If we know what needs to come out, we know what we need to put into the system, and the program we select will need to appropriately handle the process. The system is built with control files, sample master records, and the ability to perform processes on a test basis. The system is designed to include appropriate internal

controls and to provide management with the information needed to make decisions. It is a goal of an accounting information system to provide information that is relevant, meaningful, reliable, useful, and current. To achieve this, the system is designed so that transactions are entered as the occur (either manually or electronically) and information is immediately available on-line for management to use. Once the system is designed, an RFP is created detailing the requirements and fundamental design. Vendors are asked to respond to the proposal and to provide demonstrations of the product and to specifically respond to the needs of the organization. Ideally, the vendor will input control files, sample master records, and be able to show how various transactions are processed that result in the information that management needs to make decisions. An RFP for the information technology infrastructure follows the selection of the software product because the software product generally has specific requirements for infrastructure. Sometimes, the software and the infrastructure is selected from the same vendor. If not, the organization must ensure that both vendors will work together without "pointing fingers" when there is an issue with either the software or the infrastructure. Documentation As the system is being designed, it is documented. The documentation includes vendor documentation of the system and, more importantly, the procedures, or detailed instructions that help users handle each process specific to the organization. Most documentation and procedures are on-line and it is helpful if organizations can add to the help instructions provided by the software vendor. Documentation and procedures tend to be an afterthought, but is the insurance policy and the tool that is used during testing and trainingprior to launch. The documentation is tested during the training so that when the system is launched, there is no question that it works and that the users are confident with the change.

Testing Prior to launch, all processes are tested from input through output, using the documentation as a tool to ensure that all processes are thoroughly documented and that users can easily follow the procedures so that you know it works and that the procedures will be followed consistently by all users. The reports are reviewed and verified, so that theres not a garbage in-garbage out. This is all done in a test system not yet fully populated with live data. Unfortunately, most organizations launch systems prior to thorough testing, adding to the end-user frustration when processes don't work. The documentation and procedures may be modified during this process. All identified transactions must be tested during this step in the process. All reports and on-line information must be verified and traced through the "audit trail" so that management is ensured that transactions will be handled consistently and that the information can be relied upon to make decisions. Training Prior to launch, all users need to be trained, with procedures. This means, a trainer using the procedures to show each end user how to handle a procedures. The procedures often need to be updated during training as users describe their unique circumstances and the "design" is modified with this additional information. The end user then performs the procedure with the trainer and the documentation. The end user then performs the procedure with the documentation alone. The end-user is then on his or her own with the support, either in person or by phone, of the trainer or other support person. This is prior to data conversion. Data Conversion Tools are developed to convert the data from the current system (which was documented in the requirements analysis) to the new system. The data is mapped from one system to the other and datafiles are created that will work with the tools that are developed. The conversion is thoroughly tested and

verified prior to final conversion. Of course, theres a backup so that it can be restarted, if necessary. Launch The system is implemented only AFTER all of the above is completed. The entire organization is aware of the launch date. Ideally, the current system is retained and often run in "parallel" until the new system is in full operation and deemed to be working properly. With the current "mass-market" software used by thousands of companies and fundamentally proven to work, the "parallel" run that is mandatory with software tailor-made to a company is generally not done. This is only true, however, when the above process is followed and the system is thoroughly documented and tested and users are trained PRIOR to launch. Tools Online resources are available to assist with strategic planning of accounting information systems. Information Systems responsibility to principles involved.[5] Support The end-users and managers have ongoing support available at all times. System upgrades follow a similar process and all users are thoroughly appraised of changes, upgraded in an efficient manner, and trained. Many organizations chose to limit the amount of time and money spent on the analysis, design, documentation, and training, and move right into software selection and implementation. It is a proven fact that if a detailed requirements analysis is performed with adequate time being spent on the analysis, that the implementation and ongoing support will be minimal. Organizations who skip the steps necessary to ensure the system meets the needs of the organization are often left with frustrated end users, costly support, and information that is not current or correct. Worse yet, these organizations build the system 3 times instead of once. and Financial Forms aid in determining the specific needs of each organization, as well as assign

Accounting Information Systems Explained Accounting Information Systems (AIS) collect, record, store, and process data to produce information for decision makers. Accounting information systems are a set of interrelated components, that interact, to achieve a goal. Most accounting information systems are composed of smaller subsystems and vice-versa, every organization has goals. Accounting Information Systems can use advanced technology, be a simple paper-and-pencil system or be something in between. Technology is simply a tool to create, maintain, or improve a system. An accounting information systems topics impact corporate strategy and culture.

Accounting information systems offers value and is a very important part of the value chain. Although adding value is a commonly used buzzword, in its genuine sense, it means making the value of the finished component greater than the sum of its parts. It can mean, making it faster, making it more reliable, providing better service or advice, providing something in limited supply, providing enhanced features or customizing it. Value is provided by performing a series of activities referred to as the value chain which includes primary activities and support activities. These activities are sometimes referred to as line and staff activities respectively.

Information technology can significantly impact the efficiency and effectiveness with which the preceding activities are carried out. An organizations value chain can be connected with the value chains of its customers, suppliers, and distributors.

Internal Control Structure

Private banking sector is getting increasing attention due to its significant stance in the financial system. It plays a crucial role for the development and growth of the economy. Internal Control Structure is highly important for achievement of proper operational goals, reliable and relevant information and compliance with laws and regulations. Considering this importance, we have made an attempt to evaluate the Internal Control Structure in the listed local private banks and the extent of achievement of corporate goal by applying different Internal Control Structure techniques. This study mainly focuses on the evaluation of the internal control structure in local listed private banks. The present study covers the extent of implementation of internal control structure techniques. Committee of Sponsoring Organizations of the Tread way Commission (COSCO)s landmark study titled Internal Control- Integrated Framework is widely used and accepted by the major U.S Accounting Bodies as the authority on internal controls. The Study defined internal control structure as a system, structure, or process, implemented by a firms board of

directors, management and other personnel, intended to provide reasonable assurance about achieving control objectives in the following categories: 1. Effectiveness and efficiency of operations 2. Reliability of financial reporting 3. Compliance with applicable laws and regulations At the organization level, internal control objectives relate to the reliability of financial reporting, timely feedback on the achievement of operational or strategic goals and compliance with laws and regulations. At the specific transactions level, internal control refers to the actions taken to achieve a specific objective (e.g., how to ensure organizations payments to third parties are for valid services rendered). Internal control procedures reduce process variation, leading to more predictable outcomes. Internal Control Structure is important for all types of organization to achieve its objectives. Because, if a proper Internal Control Structure is implemented, all of the operations, physical resources, and data will be monitored and under control, objectives will be achieved, risks will be minimized, and information output will be trustworthy. On the other hand, if the Internal Control Structure is weak and unsound, the firms resources may be vulnerable to loss through theft, negligence, carelessness, and other risks. As a result, the Accounting Information System will likely generate information that is vulnerable, untimely, and perhaps unrelated to the firms objectives. Especially in a banking sector it is the key element to sustain in a modern competitive market. Incase of banks the degree of risk exposure is very high because it deals with the most vulnerable assets particularly cash and the frequency of dealing with cash is greater than any other organizations. In addition every transaction in banks is of higher amount. So the magnitude of potential loss is greater. In fact banks are subject to all the three factors that affect the degree of risk exposure. Whether a bank achieves operational and strategic objectives may depend on factors outside the organization, such as competition or technological innovation. Thus Internal Control Structure is highly important for banks to achieve the control objectives.

Information Systems

Information

systems can

be

grouped

into

business function categories, however, in the real world information systems are typically integrated combinations of functional information systems. Such systems support business processes, such as product development, production, distribution, order management, customer support, and so on. There is a strong emphasis in many organizations to develop such composite or cross-functional

information

systemsthat cross the boundaries of traditional business functions in order to

reengineer and improve vital business processes. These organizations view crossfunctional information systems as a strategic way to share information systems resources and improve the efficiency and effectiveness of a business, thus helping it attain its strategic objectives. Information Systems Applications Applications of information systems in the functional areas of business include: 1. Production/Operations IS 2. Marketing IS 3. Financial IS 4. Accounting IS 5. Human Resource Management IS

Business firms are turning to Internet technologies to integrate the flow of information among their internal business functions and their customers and suppliers. Companies are using the World Wide Web and their intranets and extranets as the technology platform for their cross-functional and inter-organizational information systems. In addition, many companies have moved from functional mainframe legacy systems to cross-functional client/server network applications. This typically has involved installing enterprise resource planning (ERP) or supply chain management (SCM) software. Instead of focusing on the information processing requirements of business functions, ERP software focuses on supporting the supply chain processes involved in the operations of a business. Information Systems Current Trends

Computing has become more decentralized and networked. Increase in use of computers to share and distribute sensitive information and data. Vast amounts of personal data are collected, stored, and processed electronically. Increase in the reliance on computers for daily operations. Reports of computer fraud and abuse continue to rise. Increase in the complexity of technology. Increase in use of the Internet for e-business.

Information Systems Security Information Systems Security is the protection of the information systems against unauthorized access to or modification of information whether in storage, processing or transit, and against the denial of service to authorized users, including those measures necessary to detect, document, and counter such threats.

Strategic Planning Strategic variances can be divided into:

Mutually exclusive collectively exhaustive sets of variances which capture the separate impacts of key underlying causal factors, for example, deviations between actual and budgeted sales volumes and mixes, market sizes and shares, manufacturing costs, contribution margins. Discretionary costs. Conceptualizing mission in terms of profitability and a build, hold or harvest perspective and strategy in terms of low cost leadership or product differentiation.

By analysing the variances with explicit reference to a firms mission and business strategy, you can determine the extent to which deviations between actual and budgeted performance are or are not consistent with the mission and strategy and identify specific dimensions of performance which need improvement. Analysing the variances without reference to mission and strategy can be uninformative or misleading. Strategic Planning: Performance Measurement Systems Profit-linked models evaluate measures of return-on-investment and net income into:

Productivity Price recovery Capacity utilization Other managerially relevant dimensions of performance. Effectiveness variances (market size, market share, selling prices, and product volume and mix variances) Efficiency variances (materials and labour price and efficiency, discretionary and committed cost spending variances, and/or activity-based cost variances).

Profit variances can be divided into:

Effectiveness variances are of particular importance to business units pursuing differentiation strategies and efficiency variances to units pursuing low cost, high volume strategies.

Strategic Planning: Theoretical and Empirical Relationships In Porters framework, to achieve a competitive advantage, a firm must devise a strategy to defend against, or take advantage of, the structural determinants of the nature and intensity of competition. The levels and time-paths of the ratios reflect outcomes of managers efforts to exploit sources of bargaining power over consumers and suppliers and to reduce threats from new entrants and substitutes, as well as the intensity of competition. Emphases on improvements in productivity and capacity utilization, shifts in product mix toward products with lower unit costs, and low price recovery are consistent with low cost strategies. Less emphasis on productivity and capacity utilisation, changes in product mix which may be more costly but serve less price sensitive consumers, and higher price recovery are consistent with differentiation. These relationships are fairly general and should hold for any industry or SBU. Operating choice variables of structural and exceptional cost and revenue drivers and their relationships to the ratios are conceptually similar across industries but often industry-specific in terms of measurement. Within industries, the design of each SBUs products differs depending upon the SBUs particular customer and market orientation and the configuration as well as characteristics of each SBUs operations.

Limitation I. Accounting is only one source of information and primarily provides information based on financial terms: Although this information is vital, decisions cannot be based solely on a monetary basis. Various decisions depend upon a diverse range of issues being considered. A unique combination of Quantitative as well as Qualitative factors should be considered to ensure an effective decision making process. II. The historical perspective of financial accounting: In order to obtain a recent estimate of an entitys financial performance, the corporate managers carefully scrutinize financial accounting information. In retrospect, this information is based on past performance. The information does provide clarity on the monetary issues but does not provide a definite insight into the strategic future; as the future holds various changes in terms of technology, economic situations as well as political scenarios etc. Such factors in relation to accounting are unpredictable. Therefore, a careful balance between historical accounting as well as the future forecasted outlook is required.

III. Historical cost accounting vs. underlying value in use: Some items loose their monetary value over a period of time, but under the financial accounting rules need to be included in financial reports. Though mentioned year after year in the books as monetary figures, the information may be unreliable due to the historical assumptions made on the items measurability criterion. For example, a machine in a textile factory is considered to have a useful life which extends over a period of ten years in monetary terms; however, after the period of ten years, the machine may still have the same value as prior years and contribute significantly to the overall operability of the factory.

IV. Inability to reflect the true value of strategic management: Various factors such as goodwill and natural circumstances influence the operations of an enterprise; however, these elements are difficult to measure thus, leading to their unavoidable exclusion from financial reports. For example companies depend upon their shareholders, who in turn depend on the performance of the Chief Executive Officers. Although the CEOs may have been hired by the company based upon prior performance, their future performances are not reliably measurable as they may continually vary. In the initial stages, it may be impossible to measure whether the CEOs presence will deter or appeal to the shareholders, which in turn will influence the profitability of the enterprise.

V. Measuring Volatility of external factors: Financial accounting information does not take into consideration volatile and ever increasing changes in the natural and commercial environment. Although scarcely measurable in monetary terms, their unstable nature may have adverse effects if included within the financial reports and have a volatile and cosmetic impact upon the earnings of the firm. For example, tariffs on trade, duties and other environmental issues can have significant short-term volatile effects on the organisation.

VI. The effect of non-stable monetary unit: Based from region to region, accounting information is generated at all enterprises based on the assumption that the monetary unit is stable over a period of time. In the real world scenario, the unit fluctuates on a daily basis. Enterprises usually decide on a flat rate to calculate their financing and investing needs. However, this can have adverse impacts which cannot be communicated to shareholders, if the unit has high fluctuations. For example: Indonesia 1995 US$ 1 = RP 6000, 1997 US$ 1 = RP 12000, 1999 US$ 1 = RP 9000. (Figures are approximates, just to provide an insight into the argument about the effects of the fluctuations)

From the answer above, it is evident that certain limitations of accounting information have to be taken into consideration before enterprises use merely financial information to aid their decision making process. Accounting is a crucial function for every business large or small. There are two types of accounting systems, manual and computerized. Where accounting functions were once performed by hand by trained professionals, today there is a wealth of accounting software available to help anyone keep the necessary accounting records. Whether you chose to use an accountant to perform accounting manually or use a computerized system depends upon your specific accounting needs.

Advantages That Can Save Money

Computerized accounting systems offer several advantages for small businesses. Systems for small and medium sized businesses can be purchased off the shelf at low cost. These programs allow managers to see the company's financial position in "real-time" and make adjustments to the business strategy as needed. Computerized systems can also provide instant reports on stock evaluation, profit and loss, customer accounts and payroll and sales analysis, again, allowing faster adjustments in your business strategy. In addition, transactions need to be input only once, and, with some training, anyone in the company can handle the inputting.

Advantages That Can Save Time

Using a computerized accounting system can save you time. Accounting software allows faster data entry than manual accounting, and allows documents such as invoices, purchase orders and payroll to be collated and printed quickly and accurately. Because of its efficiency and ease of use, computerized accounting systems also allow you to improve inventory control and payment collection, saving time and improving cash flow. Because computerized systems update some records automatically, your account records will always be up to date, saving time in updating.

Disadvantages
Using a computerized accounting system comes with its own set of problems, such as the need to protect against data loss through power failure or viruses, and the danger of hackers stealing data. Computer fraud is also a concern, and you need to instigate a system of controls for who has access to the information, particularly customer information. If there is a security breach and data is stolen, management can be held personally liable for the loss of data. You also need to make sure that the data has been correctly entered into the system, as a mistake in data entry can throw off a whole set of data.